May 2014, Vol. 241, No. 5

Features

INGAA Chairman David Devine Outlines Agenda

David J. Devine, president of central regional natural gas pipelines for Kinder Morgan, is 2014 chairman of the Interstate Natural Gas Association of America (INGAA).

A graduate of Rice University in Houston, he outlined his priorities and goals for Pipeline & Gas Journal, including gas and electricity reliability, regulatory and legislative issues facing the industry and the need to provide continuing education and outreach to public and private sector stakeholders.

P&GJ: What is your top priority as INGAA chairman?
Devine: As chairman, in tandem with the INGAA staff, committees and board of directors, there are number of priorities that we will collectively deal with in 2014. Advancing pipeline safety and integrity will continue to be at the forefront of the agenda.

A highly important issue relating to pipeline and public safety will be the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) rulemaking to implement the 2011 Pipeline Safety Act reauthorization. PHMSA is working on a series of proposed rules related to natural gas transmission pipelines to address concerns expressed by Congress and the National Transportation Safety Board (NTSB). We intend to be very involved in the comment process and to inform Congress, regulators and stakeholders about the tangible steps our industry has taken to improve pipeline safety.

INGAA is also addressing the issue of gas and electricity reliability. How molecules and electrons move and serve markets and customers are big, complicated topics, but very important for consumers, FERC, states and the operators of the electric transmission grid (the ISO/RTOs and in some regions the individual utilities). Electric generation is one of the fastest growing markets for natural gas and we want to ensure that pipeline capacity is available to serve this market while continuing to provide top-notch, reliable service to existing customers.

INGAA will continue to work with FERC, electric transmission operators, customers and other stakeholders to identify solutions to the many challenges created by the convergence of these two very important industries. As INGAA has stated, value is derived from stakeholders applying their experiences – including those learned in this abnormally cold 2014 winter — to develop fundamental, long-term solutions that will ensure electric reliability. But the electric industry must assign value to maintaining the reliability of the bulk power system and provide electric market participants with incentives to ensure greater electric reliability.

P&GJ: Where are we at on gas/electric integration and what are some of the challenges that need to be dealt with?
Devine: Natural gas will be consumed by industrial users and power plants to an even greater degree in years to come as the nation grapples with the pursuit of cleaner air and environment. INGAA is on record encouraging FERC to require that the rules governing wholesale power markets, and especially the markets administered by independent grid operators (ISOs and RTOs), support the investments in pipeline and storage capacity that may be needed to ensure the continued reliability of the bulk power system.

We support steps to improve communication between the natural gas and electric power industries and to make natural gas pipeline scheduling more responsive to the needs of power generators. Still, these are only parts of the answer because communication and scheduling cannot create the additional pipeline capacity that will be needed. I’m sure this debate will benefit from the additional lessons learned from this past winter heating season.

P&GJ: What do INGAA members express as their greatest concerns?
Devine: Stepping back a moment to set the stage, let’s first consider the broad forces now shaping our business:
1) Shifts are occurring in both the volume and location of supply, driven by the shale gas revolution;
2) We are seeing dramatic changes in natural gas use resulting from the abundance and affordability of natural gas;
3) Economic regulation (in other words, regulation of the rates and terms and conditions of service) remains an important factor in our businesses;
4) We are also seeing concerns of regulators and legislators evolving;
5) There is increased public and political focus on energy and, in some cases, pipelines; and
6) We operate today in a very competitive business environment that encourages consolidation and efficiency to create value.

Given those forces and factors, our industry must always contend with the impact of regulation and legislation, which is why INGAA and its leadership must remain an active voice in the energy discourse. It is vital that we, as an association, continue to actively review and comment on regulatory and legislative issues and provide continuing education and outreach to public and private sector stakeholders about our industry and its importance to the nation.

It’s also important that we continue to explain to lawmakers, the public and others the importance of natural gas to our nation’s economy and energy security and the inescapable fact that pipelines help make today’s natural gas revolution possible.
P&GJ: What pending legislation could hamper the pipeline industry?

Devine: INGAA monitors and seeks to play an active role in a number of regulatory and legislative issues, including the Pipeline Safety Bill reauthorization slated for 2015 and possible oversight hearings that may occur this year.

Generally speaking, the interstate natural gas pipeline industry has a strong legal and regulatory framework. Thanks to this workable pipeline model, we have a proven track record of building pipeline infrastructure. For example, between January 2003 and March 2013, 12,400 miles of interstate natural gas pipelines were added. In contrast, for roughly the same period, only 1,113 total miles of high-voltage interstate electric transmission lines were built.

While the natural gas pipeline approval framework is good, that does not mean it can’t be better. An INGAA Foundation report from 2012 suggested that permitting delays are becoming more prevalent, and when those delays occur, they are longer.

We need certainty and enforceable deadlines in the permitting process, which can be multi-tiered and multi-agency in nature. The House of Representatives has responded. Last year, Rep. Mike Pompeo (R-KS) introduced a bill, H.R. 1900, to address this issue which was passed by the House. We’d like to see that bill and similar ones get action in the Senate and go to the president for his signature.

P&GJ: How are INGAA members dealing with cybersecurity?
Devine: Within INGAA’s committee structure, the association recently established a physical and cybersecurity committee that is staying on top of the pertinent issues that we as an industry — and a nation — face. As part of the effort, INGAA is working in coordination with other sectors of the energy industry along with various agencies to improve the natural gas pipeline industry’s protections against cyberattacks. Generally speaking, we support a voluntary industry-government effort to address cybersecurity.

P&GJ: What progress that has been made on INGAA’s safety initiatives?
Devine: Pipeline safety action in 2014 is most likely to occur on the regulatory front as PHMSA moves ahead with proposing rules to implement the most recent set of pipeline safety amendments and recommendations from Congress and the NTSB. Congress will be watching this closely because the next cycle of Pipeline Safety Act reauthorization will begin in 2015.

Regardless of what PHMSA does, INGAA members have committed to a nine-part action plan to improve pipeline safety, and are working hard to implement those initiatives. The entire program is based on a goal of zero pipeline incidents. The action plan involves expanding integrity management beyond what is regulated to include more mileage, but prioritizing it in a way that covers the greatest number of people.
The industry is working to make more pipelines piggable and on new technologies to make inline inspection more effective, as well as furthering our outreach to all stakeholders, including public safety advocates, first responders, regulators and the public.

On the broader subject of safety, INGAA maintains that a robust safety culture is critical to success. It has driven the association to administer a safety culture survey among several member companies in 2013. The survey seeks to advance the overarching objective of zero pipeline accidents. The baseline survey results are encouraging; additional companies have since joined in the survey effort to gain greater insights into safety, best practices and continuous improvement.

P&GJ: What about construction prospects in the U.S. and where might we expect the most work?
Devine: Development of shale gas has dramatically changed the playing field of the natural gas resource base in North America. Shale gas will drive new uses that, in turn, will influence utilization of natural gas pipeline and storage infrastructure.

The pace and location of natural gas infrastructure development will be affected by the relative price and quantities of natural gas. The presence of natural gas liquids (NGLs) and crude oil in the shale plays also will be important because the overall value of these commodities determines which prospects are more attractive for producers.

The INGAA Foundation has just updated its flagship infrastructure study which will provide us with some tangible forecasts for midstream infrastructure development, not only for natural gas pipelines, but also crude oil and NGL lines.

P&GJ: What impact do you anticipate in pipeline infrastructure development as a result of this past winter and some spot prices surging to record levels?
Devine: Over time — and we’re seeing calls for more regional infrastructure projects right now — new pipeline and facility construction will be needed to serve key consuming markets in the U.S., particularly in the Northeast. While weather and pricing play roles in the discussion, a main driver is the need for clean, affordable and environmentally friendly fuels by electric generators, LDCs and industrial users.

The location of shale gas production basins relative to consuming markets will continue to drive adaptations of the interstate pipeline system that, depending on location, will include construction of infrastructure, shifts in direction of flows and re-purposing of pipelines between dry gas, NGLs and crude oil.

This extremely cold winter and the resulting price spikes in capacity-constrained regions underscore what INGAA has long said – adequate pipeline capacity is essential if you want to keep prices at reasonable levels. Some regions that experienced price spikes will seek ways to incentivize new pipeline capacity.

P&GJ: As we await the decision on Keystone XL, if it is blocked, could this make construction of natural gas pipelines more difficult?
Devine: Not necessarily. But we, as an industry, acknowledge that siting and permitting new projects has become more costly, time-consuming and unpredictable, especially at the state level where parochial interests can trump what clearly is in the best interests of a region and the nation at large. We’re also seeing increased activism beyond landowners and local interests that historically have expressed their concerns about project development.

It is incumbent on organizations such as INGAA to be pro-active and communicate continuously with our stakeholders because they can and do make a difference in the success or failure of high-priority projects and industry initiatives to serve the needs of customers.

P&GJ: What are some key challenges that could affect continued growth of the natural gas business?
Devine: To maintain the health of our industry, specifically, and contribute to the nation’s economic vitality, generally, we must continue to seek rational legislation and regulatory policies — including pursuing sensible approaches to tax policy — to help enable our industry’s ability to invest in new infrastructure.
My company, Kinder Morgan, and all of the INGAA member companies, have a vital role to play by assessing risk, obtaining necessary capital and continuing to provide the critical infrastructure needed to link gas resources to consumption markets, with the ever-present objectives of doing so safely and reliably.

P&GJ: At the end of your term, how will you measure success?
Devine: Success in my view is directly linked to the success of INGAA as a premiere natural gas trade association and the success of its members. As an association, we are tackling many issues this year, from pipeline safety and integrity to advancing a culture of safety, methane/other GHG emissions and other environmental initiatives, gas and electric reliability, plus a host of other issues, such as cybersecurity, taxation and federal regulatory agency and legislative issues. Success will be measured by the advancement of these issues. It will be a busy year.